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World stocks and euro advance on EU rescue hopes European stocks extend gains after a report suggests France and Germany have agreed on a deal to increase euro zone bailout fund
European stocks and the euro rose on Wednesday on optimism that policymakers will take major steps at a summit this weekend to tackle the festering debt crisis, offsetting the market impact of a cut in Spain's sovereign credit rating. German Bund futureswere lower as safe-haven government bonds were sold off on a report in Britain's Guardian newspaper that France and Germany had agreed on a deal to increase the euro zone bailout fund's firepower fivefold. The reported agreement was later denied by two senior European Union officials. Nevertheless, the FTSEurofirst 300 index of top European shares was up 1 percent while world stocks as measured by the MSCI index were up 0.85 per cent. "It's interesting that despite the denial the market still wants to go higher, which implies the market does think there's something in the pipeline," said Jeremy Batstone-Carr, strategist at Charles Stanley, said. "We'll see more whipsawing in the market in the run-up to Sunday." The pan-European benchmark is up more than 13 per cent from a September low with the latest gains driven by banking stocks. U.S. stock futures pointed to a mixed start on Wall Street with the S&P and Dow Jones futuresboth up 0.1 per cent while the Nasdaq 100was down 0.4 per cent. Investors were still cautious about the degree of progress policymakers will make at an EU summit on Sunday. Carrying on from some low-key comments from German officials on Monday, Chancellor Angela Merkel said on Tuesday the meeting would be an important step but warned that one summit would not be enough to resolve the crisis. Indeed, U.S. banks' earnings underscored the damage inflicted by the euro zone uncertainty and the financial market turmoil, with Goldman Sachs Group Inc posting its second quarterly loss as a public company on Tuesday. Morgan Stanley and American Express are due to announce their results on Wednesday.
